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Tuesday, January 13, 2009

I bought SSO today in anticipation of a bounce. It appears that dismal expectations have been factored into earnings season and we are seeing more media coverage of the thaw in the credit markets. Many argue that this crisis began with housing and it will end with housing---I am arguing that the positive news in the credit markets will cause a significant bounce.

We have heard different opinions on the growth (or lack of) in China. I am going on record as believing that China is going to continue to deliver growth and continue to consume more and more commodities. I have been bullish on natural gas and am officially admitting that I was wrong. It blew threw my stop of $21.75 today and I must admit I am still shocked (and at the time of this writing it is down further in overseas trade) Oil is up overseas and I think rising oil might be a catalyst that causes the market bounce. The dollar has been very (almost unrealistically) strong lately. I am still holding UDN in anticipation of the fall. Given the strength of the dollar today---you can see that oil is strong.

We confirmed our interview with John Williams of Shadow Stats for next Wednesday and will be taking viewer questions. Go to www.stockshotz.tv and fill out the contact form to submit your question. John has suggested that we could have a hyperinflationary depression. He makes a compelling case for hyperinflation and I am anxious to speak with him as he has been sounding the alarm for quite a while now and I will ask him more specifics about his timetable as we have been in a disinflation or deflation period over the last few months. I will also ask him if the Fed has the tools to fight DEFLATION if we see price declines persist.

Congress has 15 days to release the second phase of the TARP money. Does anyone really believe that they won't release it? Give me a break. It will be released. We are going to have corporate welfare coming out of our ears and it will cause inflation in the long term. I still believe that the government has been buying dollars in an effort to strengthen the dollar. Ask yourself the question "What make investors the most afraid?" Answer DEFLATION. People are confident that we know how to fight inflation, but aren't really sure how to fight deflation. Japan did not successfully fight deflation. So the more fear in the equity markets---the more money that flows into treasuries (which translates into lower borrowing costs for the government). So for the government right now fear is good. Buying dollars drives down the cost of commodities and raises fear of deflation.

I believe that we are in an area now where commodities and the equity markets will trade in tandem. If one goes up so will the other. I have been watching the futures and as oil fell from its highs of the overseas session--the futures weakened. I hope and expect that we will see both strengthen tomorrow. I AM NOT BULLISH----I JUST THINK WE ARE GOING TO HAVE A SIGNIFICANT BOUNCE.

We have many great interviews upcoming and appreciate all of our viewers.